The Package That Landed Sears

786 Acres Free, Plus Tax Breaks

Gov. James R. Thompson and Sears, Roebuck & Co. Chairman Edward Brennan unveiled a generous taxpayer-financed incentive package Monday that will subsidize the giant retailer`s entry into the lucrative commercial real estate business in the northwest suburbs and keep Sears` Merchandise Group headquarters in Illinois.

The deal not only will get Sears a low-cost office campus in northwest suburban Hoffman Estates, but it also will give the company one of the most desirable tracts remaining in Cook County.

The details of the state`s pledge to Sears were announced at a midmorning press conference at the soon-to-be-sold Sears Tower.

All but 600 of the company`s 6,600 downtown employees will vacate the Tower in 2 1/2 to 3 years.

However, how many of those 6,000 Merchandise Group employees will be joining Sears in Hoffman Estates remains unclear. The company is contemplating sharp reductions in its headquarters staff as part of a broad restructuring to reduce costs.

The state, which earlier had sought assurances of at least 5,500 moving to a new Illinois location, dropped all references to the number of jobs that would be moved in the final agreement. However, Sears did promise to keep its Merchandise Group intact.

Thompson called the incentive package, which included $61.1 million from the state, ``the largest job-retention effort in the state`s history.``

Brennan, whose announcement in October that the firm was moving triggered a nationwide bidding war, called the company`s move from the city ``the most difficult decision I`ve reached in my life.`` The city had offered the company a $164 million incentive package to move to O`Hare International Airport.

``(O`Hare) did not make it because Hoffman Estates was judged a better site,`` he said. ``Hoffman Estates gives us a lot more land for future use of our own and the development for others.`` Brennan also said the company had considered 50 out-of-state locations.

City and state officials agreed that the company`s choice was dictated by its desire to develop as much as possible of a 1,300-acre tract just west of the Poplar Creek Music Theatre along the north side of the Northwest Tollway. Sears will get 786 acres free in the deal.

``They wanted more land for development,`` said Jay Hedges, executive director of the state Department of Commerce and Community Affairs.

The company will use 200 acres on the west side of the site for its new quarters. That will leave nearly 600 acres to develop for itself or other companies.

Besides acquiring the nearly 800 acres at no cost, Sears also has signed options to match any offer made for another 400 acres there, Hedges said. Sears officials could not confirm that.

Brennan said profits from commercial real estate development in the area would make its operating costs in the new headquarters comparable to costs in its bought-and-paid-for Sears Tower. That will enable the company to realize the maximum profit from the sale of Sears Tower, without having to plow any of the $700 million to $1 billion of Tower sales proceeds into the new site.

``It was our intention to free up capital to invest in other projects,``

Brennan said.

The $61.1 million state subsidy will be used to prepare the site for development. It includes $30.7 million for site preparation and improvements such as private streets, sewers and lighting; a $2.3 million sewer line; and $20 million in state highway improvements.

Hedges said it became clear a week ago that there was nothing the city could offer to persuade Sears to build at O`Hare, which would require higher- density construction. ``A campus-like environment was an emotional issue for them,`` he said.

But the 786-acre site in Hoffman Estates, which unlike the O`Hare site is privately owned, will require a massive subsidy from the local community to make it cost competitive with out-of-state locations. Hoffman Estates officials on Monday estimated that the private owners will get about $100,000 an acre for the site.

The majority of the site-520 acres-belongs to the estate and heirs of developer Thomas J. Origer. The Nederlander Organization, which runs Poplar Creek, owns another 153 vacant acres and also will sell the 68-acre music theater to Sears. Brennan said Sears would continue to operate the theater.

To finance land acquisition-costs of which Sears would not reveal-Hoffman Estates will have to get changes in the state law governing tax increment financing in depressed areas. Thompson said he expected easy passage of the legislation this week.

Under tax increment financing, Hoffman Estates will sell a still undetermined amount of tax-exempt bonds to acquire the land, which then will be turned over to Sears free. Sears in the last week has signed purchase contracts with the owners, Sears officials said.